Client Alerts
May 19, 2014

Raging Bull and Unintended Consequences of the CTEA?

Stites & Harbison Client Alert, May 19, 2014

by Amy Sullivan Cahill and John W. Scruton

The U.S. Supreme Court today handed down its decision holding that the Copyright Act’s statute of limitation barring actions not brought within three years of infringing conduct may end the analysis of whether claims are timely in Petrella v. Metro-Goldwyn-Mayer, Inc., No. 12-1315 (May 19, 2014).

In arguments heard on January 21, 2014, Supreme Court members signaled skepticism that claims brought within a time bar established by statute would prevent the application of the equitable doctrine of laches. As Scalia noted, “what a statute of limitations says is - not that you are ‘Scott free’ within the limitations period” . .. instead, “it says you can’t be sued beyond that.” In fact, a number of comments from the bench seemed to support MGM’s argument that the application of an equitable doctrine to copyright infringement claims would indeed promote the policies behind a statutory time bar – preventing unnecessary delay by plaintiffs to the undue prejudice of defendants. However, as Petrella’s counsel made clear in his opening comments, the high court had never before applied an equitable doctrine such as laches to defeat claims for acts occurring within a federal statute of limitations period. And the Court refused to change course here.

The Petrella lawsuit followed the “truth is stranger than fiction” story of the rights in the film Raging Bull, a now cult classic biographical drama starring Robert DeNiro as boxer Jake LaMotta. The screenplay was registered with the Copyright Office in 1963, and MGM released the film to box offices in 1980.

Following the film’s release, Ms. Petrella, who had acquired the rights in the screenplay in 1991 from her deceased father who co-authored the work with Mr. LaMotta, repeatedly contacted Metro-Goldwyn-Mayer, Inc. (MGM) regarding the studio’s unauthorized exploitation of the work in film form. Her inquiries were apparently met with representations that the movie had not yet made a profit – and in fact was so deeply in debt that it likely never would become profitable. Ms. Petrella asserts such representations delayed her legal action against MGM until 2009 – more than an eighteen year gap. During this period MGM asserts that it spent in excess of $8.5 million to market the film. In her lawsuit, Ms. Petrella sought both equitable relief and damages, but limited claims for damages to MGM’s infringement occurring after 2006.

The U.S. District Court for the Central District of California granted summary judgment to MGM applying the equitable defense of laches to bar Petrella’s claims. The U.S. Court of Appeals for the Ninth Circuit affirmed, adding to what had become a divided point among the Circuits that had considered the issue, with a majority of those acknowledging the availability of laches, if only in exceptional circumstances.

The Copyright Act, 17 U.S.C. Sec. 507(b), provides “no civil action may be maintained under the [Act] unless it is commenced within three years after the claim accrued.” Copyright protection does not last forever, but it now lasts for a significant period of time – for works for hire created after 1978 – the shorter of a period of 120 years from creation or 95 years from publication. In addition, a copyright infringement cause of action is unique in that the statute of limitations runs separately from each violation, even in a series of seemingly related actions by a single defendant. This “rolling” accrual provision is also known as the “separate-accrual rule” and permits copyright owners to pin a claim under the Copyright Act to any one of a continuing series of acts, presuming each act constitutes actionable infringement.

The net effect of these two conventions is what amounts to a potentially long window in which to asserts legal rights. As Justice Elena Kagan commented during oral argument: “I mean you don’t have very many cases where courts have applied laches as against the statute of limitations, but that’s because you can’t think of many instances in which it would be considered unfair to take the entire statute of limitations to bring a suit.”

The Supreme Court was clear in its holding today that the three year statute of limitation within the Act serves as an effective limit on the recovery of damages, notwithstanding the special circumstances surrounding copyright infringement claims. According to the Supreme Court, the copyright statute of limitations itself takes into account and mitigates any “undue” delays by copyright owners in asserting claims. Ms. Petrella was denied the ability to reach back beyond the three years preceding the initiation of her suit to recover damages accruing prior to 2006. The high court’s six-three majority opinion decision views the doctrine of laches from a new perspective – as potentially upsetting the careful balance that a statutory time bar established by Congress within the context of a particular federal cause of action – here copyright infringement brought pursuant to the Copyright Act.

In response to MGM’s well-argued position that a laches defense should be available to prevent a copyright owner from sitting on its hands awaiting damages to mount, the court wrote:

It is hardly incumbent on copyright owners, however, to challenge each and every actionable infringement. And there is nothing untoward about waiting to see whether an infringer’s exploitation undercuts the value of the copyrighted work, has no effect on that work, or event complements it. Section 507(b)’s limitations period coupled to the separate-accrual rule, allows a copyright owner to defer suit until she can estimate whether litigation is worth the candle.”

The case is notable in its implications for copyright owners who now may attempt to “time” their infringement claims to a date following the most profitable three-year period of commercialization. Although the Act provides for prospective equitable relief, equitable relief may be of cold comfort to a plaintiff who hopes to collect damages for past conduct. The Court did not rule out potential curtailment of equitable relief in “extreme circumstances” such as the effect of delay in objecting to the infringement of architectural works where the requested relief took the form of demolition of the infringing structure – as the Court noted no such exceptional circumstances were presented by Ms. Petrella’s conduct.

Related Capabilities
Intellectual Property Litigation Intellectual Property & Technology Copyrights